By Kevin Bogardus - 04/24/08 06:13 PM EDT
Democratic lawmakers are calling for the Bush administration to weigh in on a looming trade battle between the U.S. tech industry and the European Union (EU).
Apple , Cisco Systems Inc ., Hewlett-Packard and other tech companies contend that their products are being hit by high tariffs by the EU despite being covered by the Information Technology Agreement (ITA). Under the ITA, the EU is supposed to give covered products duty-free treatment.
Rep. Joseph Crowley (D-N.Y.) began collecting signatures from members of the New Democrat Coalition (NDC) this week for a letter to President Bush calling on him to take action on the matter.
“The EU’s actions are contrary to the spirit and letter of the ITA, which requires its 69 signatories to bind and eliminate duties on covered products wherever they are classified,” the letter said. “It is time for our administration to take action.”
U.S. products, including set-top boxes with Internet connections, which are used to turn an external signal into content that can be displayed on a television, LCD monitors and multi-function printers are being hit by tariffs as high as 14 percent, putting the U.S. companies at a severe disadvantage with EU firms in a huge consumer market.
The problem will get more severe in 2012, when the EU switches to digital television. Millions of consumers will need digital converters to top their televisions, which according to the EU might not be covered by the ITA.
“As more and more of the devices come out, the stakes get higher every day,” said Jon Hoganson, a director of government relations for the Information Technology Industry Council. “It is definitely one of our top priorities with the administration.”
A spokesman for the Office of the U.S. Trade Representative said the administration believes the ITA should cover the products now being hit with higher tariffs.
“We are in close consultation with the industry and we are seriously considering a case in the WTO,” said USTR spokesman Sean Spicer. “The intent of the agreement should be sufficient to address this.”
The dispute began a few years ago, and its roots are in technologic change and, according to tech lobbyists, simple protectionism. The problem started after an EU court ruling held that imports should be given a customs classification based on their primary function.
As a result, the EU began classifying LCD monitors with screens larger than 19 inches as televisions instead of computer screens. It argued that because the monitors could receive broadcast signals and were large enough to use as televisions, they should be classified as televisions, which are not covered by the ITA.
Similarly, digital cameras that can shoot video clips more than 30 minutes long are considered primarily to be video cameras, not still-photo cameras, by the EU. Cameras are covered by the ITA, but video cameras are not.
It’s unclear exactly how much U.S. companies are paying in tariffs on disputed products. Apple, for example, sold $705 million in Macintosh computers in Europe during 2007’s last quarter, according to its filings with the Securities and Exchange Commission. But that figure likely includes sales of some products that are covered by the ITA.
The EU wants the U.S. to agree to negotiate the dispute by amending the ITA to cover what it says are new products. “We are wasting time by exchanging accusations,” said Nikos Zaimis, head of the trade section for the European Union’s Washington delegation. “We are ready to amend it and expand it to cover new products.”
A negotiation, however, would result in the U.S. having to make other concessions to the EU.
“Quite frankly, the EU is punishing innovation by putting duties on these tech products,” said Crowley, an NDC vice chairman. “This is something the Bush administration and the Congress can work together on, even under the current environment.”
It has been a contentious period on trade between Congress and the president because of House Speaker Nancy Pelosi’s (D-Calif.) decision to remove the 90-day time limit for a vote on Colombia’s free trade agreement, putting the deal in limbo.
Democrats have come under criticism for blocking the vote, and their support for the case against the EU could help them bolster their trade credentials to some degree.
It’s not just the U.S. that is upset with the EU over the issue. The ITA has 69 signatories overall, and anger has been building in Asia as well.
Tech lobbyists are garnering support for a WTO case with the Japanese government. In addition, the Asia-Pacific Economic Cooperation forum, a group of 21 countries including Australia, Canada and China, expressed concern over the EU’s actions and said “that the integrity and original spirit of the ITA” must be maintained, according to a March 3 press release.